Valuation of Takeover Targets and Auditor Quality

DBW Die Betriebswirtschaft - Business Administration Review (BARev), 2013, Forthcoming

44 Pages Posted: 22 Aug 2013

See all articles by Lasse Niemi

Lasse Niemi

Aalto University - School of Business

Hannu Ojala

University of Eastern Finland; Aalto University - School of Business

Tomi Seppälä

Aalto University School of Business

Date Written: December 12, 2012

Abstract

This study investigates whether the market’s perception of auditor quality makes a difference to the market value of a firm using a sample of 1 915 takeover offers in the USA over the period 1990 to 2005. The study finds, as hypothesised, that the takeover process makes a smaller correction to the market price of the target when it has a Big 4 auditor suggesting that less private information becomes available. We find no empirical evidence for the auditor switch effect, which is an alternative explanation for the lower CARs for Big 4 targets.

Keywords: Audit quality, valuation, takeovers

JEL Classification: G34, M41, M42

Suggested Citation

Niemi, Lasse and Ojala, Hannu and Seppälä, Tomi, Valuation of Takeover Targets and Auditor Quality (December 12, 2012). DBW Die Betriebswirtschaft - Business Administration Review (BARev), 2013, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2313675

Lasse Niemi (Contact Author)

Aalto University - School of Business ( email )

P.O. Box 21210
Helsinki, 00101
Finland

Hannu Ojala

University of Eastern Finland ( email )

Yliopistonranta 1
Kuopio, 70210
Finland
+358443290604 (Phone)

Aalto University - School of Business ( email )

P.O. Box 21210
Helsinki, 00101
Finland

Tomi Seppälä

Aalto University School of Business ( email )

P.O. Box 21210
Helsinki, 00101
Finland

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